DOAR is pleased to announce a successful defense verdict in a closely watched securities litigation tried in the U.S. District Court for the Southern District of New York. Following a multi-week trial, a federal jury rejected claims seeking more than $500 million in alleged short-swing profits under Section 16(b) of the Securities Exchange Act.
The case arose from a 2020 PIPE financing involving Kartoon Studios and centered on allegations that certain investors had formed a statutory “group” subject to Section 16(b)’s disgorgement provisions. The plaintiff contended that the defendants coordinated their activities in a manner that triggered insider liability and sought the return of alleged short-swing trading profits.
After approximately five hours of deliberation, the jury found that the remaining defendants did not constitute a group under the securities laws, resulting in a complete defense verdict on the claims presented at trial.
DOAR supported six of the eight defendants during the pretrial phase of the case, providing jury research and graphics to evaluate key themes and defenses. Following pretrial settlements by six of the defendants, DOAR continued its support of the remaining two defendants, Empery Asset Management and Brio Capital. Working alongside counsel from Freshfields and Ellenoff Grossman & Schole, respectively, DOAR provided jury selection, witness preparation, trial strategy consulting, graphics consulting and design, and courtroom presentation services through the successful defense verdict. We congratulate the trial teams at Freshfields and Ellenoff Grossman & Schole on this significant victory.
The verdict represents a significant victory in a case closely followed by the securities and investment communities, particularly given the substantial amount at stake and the broader implications for PIPE transactions and investor-group liability under Section 16(b).
Read more about the case.
